Adidas to pay ex-chief €15.9mn as it slashes dividend after Kanye West saga

Ousted Adidas chief executive Kasper Rørsted is to receive a golden parachute of up to €15.9mn despite the struggling company slashing its dividend and bonuses as it braces for its first annual loss in 31 years.

The world’s second-largest sportswear maker swung to a quarterly operating loss at the end of 2022 as sales from China halved and unsold Yeezy trainers piled up following the brand’s decision to sever ties to US rapper Kanye West.

Two months after the start of new chief executive Bjørn Gulden, the company has announced a board reshuffle, announcing the departure of its head of sales Roland Auschel and head of brand Brian Grevy.

Auschel, who in 2021 was internally rebuked over “inappropriate and unacceptable” remarks about diversity, will be replaced by Arthur Hoeld, an Adidas veteran of 25 years who has been managing director for the Emea region since 2018. The contract for chief financial officer Harm Ohlmeyer was extended by three years until 2028.

The German sportswear group cut its full-year dividend 79 per cent to 70 cents, down from €3.30 for 2021.

The fourth quarter operating loss of €724mn was better than analyst expectations of a €782mn loss, but Ohlmeyer said a 50 per cent decline in sales in China for the period, was “much higher than anticipated”.

Overall, sales in 2022 rose 1 per cent excluding currency fluctuations while net profit dropped 70 per cent to €638mn.

Shares in Adidas fell 1.9 per cent in early morning trading, after losing 57 per cent since its peak in August 2021. “The new numbers today are a slightly better than feared,” wrote Jefferies analyst James Grzinic in a note to clients.

Adidas on Wednesday reiterated last month’s warning that it might suffer an annual loss of up to €700mn in 2023, which would be the first in 31 years. Overall sales this year are set to fall “at a high single-digit rate”.

The group’s decision to cut links with Kanye West in October will wipe out €1.2bn in annual revenue and may lead to €500mn in losses should the Yeezy brand be unable to sell its remaining stock of trainers.

Inventories shot up 49 per cent last year to €6bn, including unsold Yeezy trainers worth €400mn. “Inventories is the number one challenge we need to resolve,” Ohlmeyer said at the company’s headquarters in Herzogenaurach.

Adidas has not decided what to do with the unsold Yeezy stock. “Many people have very simple solutions. But I can tell you it’s one of the most difficult decisions that I’ve been part of,” said Gulden, who joined from arch rival Puma. The options range from destroying the products to selling them and donating the proceeds to charity.

Rørsted’s departure came after a series of profit warnings, the better performance of Puma and in the wake of the Kanye West saga. The company disclosed in its annual report that Rørsted will receive a severance payment of €12mn plus €3.6mn in compensation for not joining a competitor for 18 months, as well as his remaining salary of about €300,000 for November and December.

By contrast, his colleagues received no bonus in 2022, with an overall 29 decline of executive compensation.

Asked if Rørsted’s severance package was fair, he told journalists that he wasn’t involved in the discussions. “If you give me €16mn when I get fired, I wouldn’t say it’s unfair,” he said, adding that he received nothing when he left Puma which has just reported the best results in its history. “At least he did better than me there.”

Gulden promised to bring the company “back to be the best sports brand in the world once again” but warned that it would take time as it first needed to cut inventories and discounts. “2023 will be a transition year to build the base for 2024 and 2025,” he said.

He is targeting a double-digit operating profit margin but asked for patience get there. “If you run the business for short term profit in these circumstances, you can do big mistakes,” he added.